It's definitely a hands on thing, and even right now I can't figure out which way it goes. I'm pretty sure it goes: purse, right sides out, then handles (with the inside of the handle facing out, so the right side of the handle is against the right side of the purse), and the lining goes outside of everything, with right sides in (I think). When I sew the lining together (without the purse, just the lining) I leave a little hole on the bottom or the sides, so that I can turn everything rightside out when sewn together.
Clear as mud, right?